Stocks Substantially Lower into Final Hour on Rising Sovereign Debt Angst, Increasing Economic Fear, Financial/Energy Sector Pessimism

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 29.07 +8.03%
  
• ISE Sentiment Index 80.0 -20.79%
  
• Total Put/Call 1.24 +27.84%
  
• NYSE Arms 2.52 +119.56%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 120.49 bps +3.37%
  
• European Financial Sector CDS Index 154.34 bps +6.28%
  
• Western Europe Sovereign Debt CDS Index 133.50 bps +6.94%
  
• Emerging Market CDS Index 260.41 bps +1.91%
  
• 2-Year Swap Spread 38.0 +3 bps
  
• TED Spread 41.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .12% unch.
  
• Yield Curve 245.0 +2 bps
  
• China Import Iron Ore Spot $143.10/Metric Tonne -.07%
  
• Citi US Economic Surprise Index -20.0 +.6 point
  
• 10-Year TIPS Spread 1.95% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -168 open in Japan
• DAX Futures: Indicating +15 open in Germany

Portfolio:

• Slightly Lower: On losses in my Technology and Retail long positions
  
• Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades substantially lower, to session lows, despite a bounce in the euro and rise in commodities. On the positive side, Education, Gold, Drug and Utility stocks are holding up well. On the negative side, Gaming, Semi, Computer, Paper, Oil Service, Road&Rail, Retail, Construction, Networking, Disk Drive, Energy and Alt Energy shares are especially weak, falling 2.5%+. It remains a huge negative that Greece sovereign debt angst continues to rise despite Europe's recent actions. The Greece sovereign cds is rising another +7.98% to 995.94 bps, which is very near its record high of 1,031 on May 7th. Moreover, the China sovereign cds is rising +4.44% to 87.71 bps, the Japan sovereign cds is rising +4.98% to 91.28 bps and the Russia sovereign cds is surging another +4.11% to 193.67 bps. Finally, the European Investment Grade CDS Index is rising another +3.9% to 123.79 bps. Oil is firm today on hurricane/Iran fears and the euro continues to trade well on weak US economic data and short-covering. The AAII % Bulls fell to 34.46% this week, while the % Bears rose to 32.43. Given recent headwinds I would have expected to see a few less bulls. (AAPL) continues to support the Naz and trades very well. (RIMM) reports after the close today. I suspect the company is losing more market share than perceived and will likely disappoint again either this quarter or next. Today's equity decline is a bit too orderly and quiet to indicate another tradable low, in my opinion. I expect US stocks to trade modestly lower into the close from current levels on technical selling, rising US housing worries, increasing sovereign debt angst, China bubble fears, tax hike worries, increasing financial sector pessimism and more shorting.